First published: Financial Times, 03/05/2011
China is widely seen as a beacon of sustained economic expansion and financial stability, in contrast to a troubled western world. However it is worth asking whether China’s investment-intensive growth model, and developments in credit and inflation, are pushing it towards its own version of a “Minsky moment” – named after the US economist who warned that the process of leverage always culminates in instability. As western countries discovered in 2008, this is the point at which policy or other endogenous shocks lead to financial instability and falls in asset prices, investment and economic growth. Could China be flirting with a similar outcome?…….more
